Energy from Shale: Opportunities, Challenges, and Policy Implications Shale Answers Rayola Dougher API Senior Economic Advisor, dougherr@api.org
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 U.S. oil and natural gas production is increasing as a result of technological innovations U.S. Crude Oil Production (millions of barrels per day) U.S. Natural Gas Marketed Production (billions of cubic feet per day) 10 9 8 7 6 5 80 75 70 65 60 55 50 45 40 35 4 30 Note: Bars in red show EIA s Short-term Energy Outlook forecast. Source: Energy Information Administration.
SHALE ENERGY PROVIDES A NATIONAL OPPORTUNITY Shale Resources, Lower 48 States Current Shale Resources Prospective Shale Resources Basins Stacked Resources Shallowest/ Youngest Mid-Depth/ Mid-Age Deepest/Oldest Current and prospective resources and basins in the continental US Source: EIA based on data from various published studies updated May 9, 2011
Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Billions cubic feet per day (dry) U.S. shale gas production has increased rapidly in recent years 35 30 25 20 15 10 5 0 Marcellus (PA & WV) Haynesville (LA & TX) Eagle Ford (TX) Fayetteville (AR) Barnett (TX) Woodford (OK) Bakken (ND) Antrim (MI, IN, & OH) Rest of US Source: EIA
Horizontal Utica Point Pleasant Well Activity in Ohio
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2013 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2013 Ohio s production increased sharply in 2013 Ohio Crude Oil Production (thousands of barrels per day) 45 40 35 30 25 20 15 10 5 0 Ohio Natural Gas Marketed Production (millions of cubic feet per day) 600 500 400 300 200 100 0 Source: Energy Information Administration and Ohio Department of Natural Resources.
Shale production is offsetting declining production from other U.S. oil and natural gas resources 10 U.S. Crude Oil Production by Source (millions of barrels per day) 40 U.S. Natural Gas Production by Source (trillion cubic feet per year) 9 35 8 7 6 Tight Oil 30 25 Shale Gas 5 20 4 3 Lower 48 Onshore Conventional 2 Lower 48 Offshore 1 Alaska 0 1990 2000 2010 2020 2030 2040 Source: EIA, Annual Energy Outlook 2014 15 10 5 Lower 48 Onshore Conventional Lower 48 Offshore Coalbed methane Tight Gas Alaska 0 1990 2000 2010 2020 2030 2040
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Price Index: January 2007 = 1.0 The price of natural gas has fallen relative to crude oil Changes in the price of crude oil and natural gas 3.0 2.5 Crude Oil (WTI) Natural Gas (Henry Hub) 2.0 1.5 1.0 0.5 0.0 Source: EIA
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 Henry Hub $/MMBTU EIA forecasts relatively low natural gas prices for decades Forecast 10 9 8 7 6 5 4 3 2 1 0 Source: EIA
Shale energy revolution has pronounced impact on energy-intensive industries Percent Increase to Industrial Production Indices due to the Unconventional Activity Value Chain 2012 2020 2025 Iron & Steel Resins & Synthetic Material Basic Organic Chemicals Plastics and Rubber Fabricated Metal Agricultural Chemical Nonmetallic Mineral Petroleum & Coal Machinery Total Manufacturing 2.2% 6.7% 1.7% 6.0% 1.5% 7.1% 1.5% 4.1% 4.6% 1.4% 3.2% 4.8% 1.2% 6.9% 1.2% 3.5% 4.1% 1.0% 5.8% 0.4% 3.3% 4.0% 1.3% 3.5% 3.9% 7.4% 8.1% 9.5% 7.7% 6.5% Source: IHS Global, America s New Energy Future, Volume 3: A Manufacturing Renaissance.
More energy can lead to American prosperity American consumers annual savings due to lower gas prices resulting from shale energy development (IHS Global Insight)
Big savings for Ohio s school districts On energy last year, enough to employ over 700 teachers (IHS Global Insight)
Big savings for Ohio s state and local governments On energy last year, enough to employ about 158 government workers (IHS Global Insight)
Oil and natural gas development equals more jobs Construction Industry Drilling Industry Chemical Industry Trucking Industry Hospitality Industry Steel Industry
Employment contribution of oil and natural gas development in Ohio 184,502 177,038 178,280 2011 Q4 2012 Q4 2013 Q4 Source: Ohio Department of Job and Family Services, Ohio Shale, July 2014
Ohio Jobs Supported by Shale Development Direct Jobs Indirect Jobs 120 New Jobs Ken Miller Supply Wooster, Ohio CHK correspondence with company 160 New Jobs 508 Jobs Saved US Steel Lorain, Ohio http://www.cleveland.com/business/index.ssf/2011/02/us_steel_investing_in_lorain_l.ht ml 449 New Jobs 489 Jobs Saved Republic Steel Lorain, Ohio http://www.cleveland.com/business/index.ssf/2011/11/republic_steel_to_add_449_new.ht ml 100 New Jobs BP Warren, Ohio CHK correspondence with company 120 New Jobs TMK IPSCO Brookfield, Ohio http://www.wytv.com/content/news/local/story/brookfield-getting-new-company-new- Jobs/LEcE8PoD3UeQAJABgGhFKQ.cspx 700 New Jobs Baker Hughes Massillon, Ohio http://www.cleveland.com/shalegas/index.ssf/2012/02/baker_huges_to_hire_700_people.html 350 New Jobs 100 Jobs Saved V&M Star Youngstown, Ohio http://www.vindy.com/news/2010/feb/16/vampm-delivers-plant-350-jobssflb/ 300 New Jobs Ariel Corp Mt. Vernon, Ohio http://www.dispatch.com/content/stories/busines s/2013/02/10/well-positioned.html 150 New Jobs Weatherford Youngstown, Ohio http://www.vindy.com/news/2012/may/08/new-jobs-slated-mahoning-valley/ 70 New jobs State of Ohio: Ohio Dept. of Natural Resources (ODNR) Columbus, Ohio http://www.wkbn.com/content/news/local/story/ohio-puts-more-gas-and-oil-inspectors-in-the- Field/Pv3k_rZXskm-N2tnJw9VMA.cspx 500+ New Jobs Chesapeake Energy Louisville, Ohio 100 New Jobs Kelchner Dayton, Ohio CHK correspondence with company 45 New Jobs CESO Dayton, Ohio CHK correspondence with company 300 New Jobs Halliburton Zanesville, Ohio http://www.zanesvilletimesrecorder.com/article/20120429/news01/204290301?gcheck =1&nclick_check=1 145 New Jobs 55 Jobs Saved Tremcar Dover, Ohio http://www.timesreporter.com/opinion/editorials/x1569735116/our-opinion-insidertrading-in-congress-needs-to-stop 250 New Jobs Schlumberger New Philadelphia, Ohio http://www.timesreporter.com/features/x1112928591/strasburg-oil-and-gas-venture-is-biggest-jobsopportunity-in-decade
Oil and natural gas jobs pay well (average annual wages) Oil and natural gas extraction $154,317 Pipeline transportation $116,425 Drilling oil and gas wells Support activities for oil and gas Oil and gas pipeline construction Ohio $94,115 $81,696 $72,667 $44,059 U.S. average $49,700 Source: U.S. Quarterly Census of Employment and Wages, 2013.
Wages for Ohio Shale-Related Industries Petrochemical manufacturing Oil and gas pipeline construction Pipeline transportation of natural gas Natural gas lqiuid extraction Engineering services Iron, steel pipe and tube Environmental consulting Drilling oil and gas wells Oil and gas field machinery Site prepartion contractors Water supply and irrigation systems Geophysical surveying and mapping General frieght trucking $95,120 $79,351 $76,243 $73,283 $72,425 $62,579 $61,271 $59,748 $58,325 $54,412 $51,216 $48,955 $40,280 Source: Ohio Department of Job and Family Services, Ohio Shale, July 2014
Oil and natural gas operations rippling through the economy of Ohio The industry contributes to Ohio s economy (PWC)
Shale development equals more government revenue U.S. $74 billion in 2012 $126 billion by 2020 $1.6 trillion 2012-2025 Ohio state and local $911 million in 2012 $4.6 billion by 2020 $58 billion 2012-2025 Source: IHS Global Insight, August 2013
The oil and natural gas industry has invested over $3 trillion in U.S. capital projects since 2000 Billions $ $400 $350 $300 $250 $200 $150 $100 $50 $0 *Planned Source: Oil & Gas Journal, various issues.
Cumulative spending on oil and natural gas infrastructure to reach $890 billion over next eleven years (2012 dollars) $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Natural Gas Rail & Marine Crude Oil Refineries Common Infrastructure Source: IHS Global Inc, Oil & Natural Gas Transportation & Storage Infrastructure, December 2013.
Power and Politics
Growth in U.S. oil production has largely offset the growth in global supply disruptions 3.5 Growth in Global Supply Disruptions (mmb/d) Growth in U.S. Oil Production* (mmb/d) 3.5 3.0 2.5 3.0 2.5 Other liquids 2.0 1.5 Non- OPEC 2.0 1.5 1.0 0.5 OPEC 1.0 0.5 Crude oil 0.0 Jan 2011 Jan 2012 Jan 2013 Jan 2014 0.0 Source: EIA * Light blue represents production of hydrocarbon gas liquids, biofuels, and refinery processing gains.
Million barrels per day World crude oil and liquid fuels production growth 2 1.5 1 0.5 0-0.5-1 -1.5 2013 2014 2015 OPEC North America Russia and Caspaian Sea Latin America North Sea Other Non-OPEC Source: EIA, Short-term Energy Outlook, September 2014
United States Canada Russia China Kazakhstan Sudan Oman Brazil Colombia Other North Sea Malaysia India Vietnam Gabon Australia Egypt Norway Mexico Azerbaijan Syria United Kingdom (million barrels per day) Non-OPEC crude oil and liquid fuels production growth 5 4 3 2 1 0 2015 2014 2013-1 Source: EIA, Short-term Energy Outlook, September 2014
Crude oil and petroleum product imports have declined as a share of consumption 70% 60% 50% 40% 30% 20% 10% 0% Source: EIA
Why export crude oil? Crude oil exports yield economic benefit across all 50 states Save consumers up to $5.8 billion a year in lower fuel costs Add 300,000 jobs to U.S. economy in 2020 Reduce America s trade deficit by $22 billion in 2020 For Ohio could add 16,000 jobs and $2.7 billon in state income by 2020 Source: ICF International and EnSys Energy,
Eight US facilities have been approved to export LNG, over 20 are awaiting approval and there are more than 60 competing sites planned or under construction in foreign nations Source: API LNG Export Facility Map
Why export natural gas? 30,100 new jobs $5.1 billion in state income Source: ICF International
87% of federal offshore acreage is off-limits to development
Development of Canadian oil sands would benefit the U.S. economy
Filling America s tank Within 10 years Canada and U.S. can provide all our liquid fuel needs Sources of liquid fuel supply in 2024 24% 10% 13% 53% Oil from Rest of World Biofuels Oil from Canada U.S. Oil Production 10% 18% 72% EIA Forecast Sources: EIA; Wood Mackenzie Potential
Source: Wood Mackenzie, U.S. Supply Forecasts and Potential Jobs and Economic Impacts, September 7, 2011.
Voters voice strong support for increased domestic oil and natural gas development Harris Poll Results on Increased U.S. Oil and Natural Gas Development 94% 91% 86% 75% 73% 69% 68% Importance of energy security Lead to more jobs Help lower energy costs Support building Keystone XL pipeline Support O&NG development Support offshore development Increasing energy taxes may hurt consumers Source: Harris Interactive telephone poll, November 6, 2012
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